83(b) Elections: Smart Tax Strategy for Restricted Stock in California and Nevada

If you’re receiving restricted stock as part of your compensation, understanding 83(b) elections can save you thousands in taxes and give you more control over your financial future. Whether you’re building a startup in Silicon Valley, working in Los Angeles, or launching a business in Las Vegas or Reno, the timing and strategy behind an 83(b) election are crucial.

What Is an 83(b) Election?

An 83(b) election allows you to elect to be taxed on restricted stock at the time of grant, instead of waiting until vesting. By paying taxes upfront on potentially lower-valued stock, you can reduce ordinary income tax exposure and potentially convert future gains into long-term capital gains.

Key points for California and Nevada residents:

• Only applies to restricted stock, not RSUs.

• Must be filed with the IRS within 30 days of the grant date.

• Copies must be sent to your employer and retained for your records.

• California follows federal rules for 83(b) elections; Nevada has no state income tax, so your election primarily impacts federal taxes.

Why File an 83(b) Election?

1. Potential Tax Savings – Pay tax on grant value rather than higher stock value at vesting.

2. Long-Term Capital Gains – Future appreciation may qualify for favorable tax treatment if held more than a year.

3. Peace of Mind – Avoid surprises from sudden increases in stock value.

Filing an 83(b) Election in California & Nevada

1. Complete the 83(b) Election Form – Include personal information, stock details, grant date, and fair market value.

2. Send to IRS – Certified mail is recommended for proof.

3. Provide a copy to your employer – Payroll and tax records need to reflect your election.

4. Keep a copy for your records – Critical for potential audits.

💡 Pro Tip: Missing the 30-day deadline can make you ineligible to file later.

Common Mistakes

• Confusing RSUs with restricted stock

• Delaying the filing until vesting

• Not sending copies to employer

• Forgetting state-specific rules (important for California residents)

  
  

FAQs About 83(b) Elections

1. Can RSU recipients file an 83(b) election?

No. RSUs are not stock at grant, so they don’t qualify.

2. What if I miss the 30-day deadline?

You generally cannot make the election retroactively. Taxes will be due at vesting.

3. How much tax will I pay?

You pay ordinary income tax on the stock’s fair market value at grant. Future gains are taxed as capital gains.

4. Do California and Nevada residents have to worry about state taxes?

California follows federal rules and taxes income at vesting, so 83(b) can reduce state tax exposure. Nevada has no state income tax, so only federal taxes are affected.

5. Should I hire a CPA or tax advisor?

Yes. Filing correctly and understanding timing is critical, especially in high-value startup scenarios.

Smart Tax Strategy for Founders and Employees in California & Nevada

Filing an 83(b) election is a strategic financial decision for anyone receiving restricted stock in high-growth companies, from Silicon Valley tech startups to businesses in Las Vegas or Reno. Filing early can reduce your tax burden, protect your equity, and help maximize your long-term gains.

Key Takeaways

• Only for restricted stock, not RSUs

• File within 30 days of grant date

• Pay tax now to save later

• Consult a professional to ensure it fits your personal financial situation

By acting on an 83(b) election, California and Nevada residents can take control of their taxes and equity, ensuring no surprises when your stock vests.